Developers of the proposed Alon Las Vegas resort on the Strip say they’ll continue to explore options to get the project started after its principal financial backer, Australia-based Crown Resorts, backed out of the deal Thursday.
Crown, whose top shareholder is Australian billionaire James Packer, did not provide details of the move, announced in a brief statement on the company’s website.
In an interview with the Review-Journal, Andrew Pascal, co-chairman and CEO of Alon, said Crown’s exit didn’t surprise him considering the numerous changes the Australian company is undertaking.
“I wouldn’t say it was a surprise,” Pascal said in a telephone interview. “It was a little bit abrupt, but we had a fair amount of discussion in and among the owners and the partners around how things have been progressing over the better part of the last six months.
“The fact they’ve elected not to put anymore capital in the project and refocus their efforts back home is not a complete surprise, but it means we’re going to have to flesh out what our options are and figure out another path going forward,” he said.
Crown also announced it would sell half its stake in Melco Crown Entertainment, which operates resorts in Macau.
Pascal, former president of Wynn Las Vegas, made it clear that operations are not shutting down and that developers can devote “several months” to exhaust all options.
“The challenge is purely the ambitious nature of the project,” Pascal said. “Crown was providing a substantial amount of reliant equity capital and now we have to go find somebody else. The project is still viable, it’s very compelling, it provides compelling returns and I would say in some cases, it might open up and create new opportunities where there were prospective investors that we talked to in the past that were potentially looking to come into the project but because they couldn’t come in in a more meaningful way, they elected not to.”
He’s encouraged by Southern Nevada’s upswing and believes that will play favorably in replacing Crown.
“We’ve got a lot to advance the project,” he said. “Everything about it supports that there is a really significant opportunity here. Las Vegas is very exciting with record visitation and record revenues and we believe that our site and how it’s positioned on the Strip are ideal and we think the concept that we have for the resort and how we have it positioned is perfect for where the market is and where we think the market’s going.”
Alon would be located on 35 acres on the north end of the Strip on the former site of the New Frontier. The site is near Fashion Show mall, Trump International and the planned location of Resorts World Las Vegas.
Pascal’s team has spent two years in the program planning, design, development, pre‐construction and entitlement process and consider the site “shovel‐ready.”
Packer, Pascal and Los Angeles investment firm Oaktree Capital Management took control of the Alon site in 2014. They acquired 18.4 acres through foreclosure and leased the remaining 16.2 acres from longtime owners the Elardi family.
When the group announced they had acquired the property, officials said they expected to start building a resort in late 2015 and to finish in 2018.
Project plans have called for a 3.4 million-square-foot, 1,100-room resort with 26- and 17-story towers, a man-made lake, about 27,800 square feet of casino space and roughly 84,800 square feet of convention space.
‘SOME ISSUES THERE’
Real estate broker Michael Parks, a member of CBRE Group’s global gaming group, says it wasn’t “completely surprising” that Crown is backing out, given the reported problems, and that it was “widely speculated there could be some issues there.”
Still, he said the project site remains “an absolutely prime piece of real estate” and that a resort like Alon, in targeting affluent customers, could still work, as the “high-end segment of the market has been relatively strong.”
Bo Bernhard, executive director of UNLV’s International Gaming Institute, acknowledged that Crown’s announcement does not send a good signal. But he pointed out that the company also is pulling back from the Chinese gambling enclave of Macau.
As part of its Alon announcement, the company also said it reached a deal to sell around half its stake in Melco Crown Entertainment. The sale would generate $1.6 billion Australian ($1.18 billion U.S.) in net proceeds for Crown and reduce its ownership stake in Melco from 27.4 percent to 14 percent.
Crown later announced it planned to sell more shares in Melco, and that the two deals would generate $1.9 billion Australian in combined proceeds.
Bernhard also noted that Chinese authorities have targeted Crown employees recently. Three employees were arrested last month, after they and 15 other Crown workers were detained in China in October amid a crackdown there on the promotion of gambling, The New York Times reported.
The arrested employees weren’t named. But in October, Crown said in a statement that it believed Jason O’Connor, executive vice president of international VIP operations, was one of the 18 detained by Chinese authorities.
According to Bernhard, the arrests take a “psychological toll” and would make anyone “less excited about going into expansion mode and new and faraway places.”
Review-Journal business reporter Eli Segall contributed to this report. Contact Richard N. Velotta at email@example.com or 702-477-3893. Follow @RickVelotta on Twitter.